In a report on the emerging technology, ESMA predicted that the early applications of DLT will focus on optimising processes in areas with low automation volumes and processes with minimum dependency on the existing legal framework.
ESMA also reviewed the potential challenges that market participants currently investing in DLT could face, including how the technology will sit within the current regulatory framework.
“The development of a new technology, such as DLT, does not liberate users from complying with the existing regulatory framework, which provides important safeguards to ensure the stability and proper functioning of financial markets,” ESMA stated.
Issues around interoperability, governance, privacy and risk creation were also flagged as “requiring further attention”.
The regulator added that, in the short term, it doesn’t see the current framework posing an obstacle to the progression of DLT.